POTENTIAL FOR GROUNDFISH SUBSTITUTION AS ALASKA’S 2007 SEASON BEGINS A number of Alaska’s groundfish fisheries opened on January 1st, marking the beginning of what promises to be a transitional 2007 season. Fisheries opening on the first day of the year were: hook and line fisheries and for all gear types. The other major fisheries – pollock, Atka mackerel and trawl cod – will open on January 20th. The coming two seasons will test the current species consumption pattern in the whitefish market, at least for Alaskan species. Quotas for the two most sought-after Alaskan whitefish species – pollock and Pacific cod – are down for 2007, and will fall even further in 2008. Quota cuts for pollock are not necessarily worrisome, as they follow a natural ebb in the stock’s after a recent peak cod and are only in the range of 5% per year. The decline in Pacific cod biomass is less reassuring and the quota cuts more extreme: by (9%) in 2007 and (26%) in 2008. Federal fisheries legislation allows managers to offer an all-species limit of 2 million metric tons (MT) per year in the / Aleutian Islands (BSAI) area, so they have replaced the cut pollock and cod quotas with other groundfish species. Increases in the quotas of flatfish species such as yellowfin (+45,500MT), rock sole (+13,500MT), flathead sole (+10,500MT) and Alaska (+17,000MT) means that despite the cuts to pollock and cod quotas, the total BSAI quota in 2007 will be 1% higher than in 2006. NPFMC PRELIMINARY BSAI GROUNDFISH QUOTAS, 2007-20008 all figures in metric tons (MT) unless otherwise noted Total Allowable Catch (TAC) % change % change Species 2006 2007 2006-2007 2008 2007-2008 Pollock 1,497,510 1,413,010 (5.6%) 1,337,010 (5.4%) Cod, Pacific 188,180 170,720 (9.3%) 127,070 (25.6%) , arrowtooth 12,000 20,000 66.7% 30,000 50.0% Sole, yellowfin 90,686 136,000 50.0% 150,000 10.3% Sole, rock 41,500 55,000 32.5% 75,000 36.4% Sole, flathead 19,500 30,000 53.8% 45,000 50.0% Plaice, Alaska 8,000 25,000 212.5% 60,000 140.0% Others 124,804 150,270 20.4% 175,920 17.1% Total 1,982,180 2,000,000 0.9% 2,000,000 0.0% BSAI Bering Sea / Aleutian Islands NPFMC North Pacific Fishery Management Council Rising prices and declining quotas for pollock and Pacific cod may spur species substitution for the increasingly available flatfish species: - On the demand side food services buyers may no longer be willing to pay current rates for pollock and Pacific cod fillets and/or may not be able to secure enough supply at their desired price point. - On the supply side, the current processing capacity in China was built in part to service the recent high levels of Alaskan pollock and cod quotas. With a cut to those quotas, the Chinese plants on average will see less pollock and cod raw material and will therefore be keen to use higher quantities of other high volume raw materials such as yellowfin or rock sole. As the quantities of these substitute species rise, finished product prices are likely to fall, at least initially. Sources: NPFMC, NMFS

Implications for frozen seafood buyers:

• Buyers may wish to review the cost of substitution for their current pollock and Pacific cod products.

• In particular for lower price markets, yellowfin sole or other flatfish fillets may be cost effective substitutes for pollock fillets, for which prices are high and rising.

• Any attempts at substitution should be accompanied by a customer education program. For example a sole fillet has a different look and texture than a pollock fillet, and may be suited to different culinary preparations. Visit www.tradexfoods.com or contact your Tradex Foods account manager.

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